With the recent extension of temporary relief for virtual AGMs, electronic shareholder communications and signatures to March 2022 and permanent reform measures set to be introduced to Parliament later this year, the AICD has updated its joint guidance with the Governance Institute of Australia, Australasian Investor Relations Association and the Law Council of Australia to help organisations navigate the evolving landscape.
The Treasury Laws Amendment (2021 Measures No. 1) Act , which came into effect in August 2021, temporarily amends the Corporations Act 2001 (Cth) (Corporations Act) to:
- hold virtual AGMs (regardless of any constitutional requirements for in-person AGMs);
- distribute meeting related materials to shareholders and members electronically; and
- validly execute documents electronically.
This is welcome news given many organisations are still operating under pandemic conditions that include heavy restrictions on face-to-face gatherings. The AICD has been a strong advocate for such regulatory relief.
ASIC extends time for holding AGMs
Under its new emergency making powers to grant individual and class order relief in exceptional circumstances, ASIC has granted a further extension for companies to hold their AGMs this season while restrictions on gathering and movement persist during the COVID-19 pandemic.
Under the legislative instrument, ASIC Corporations (Extension of Time to Hold AGM) Instrument 2021/770:
- Public companies with balance dates between 21 February 2021 and 7 July 2021 will have an additional two months to hold their AGM. ASIC previously had in place a ‘no-action’ position for those companies to enable their AGM to be held within seven months after year end, instead of five months. The extension under this new instrument adds to that no-action position, allowing public companies with balance dates up to 7 July 2021 an effective four month extension; and
- Public companies limited by guarantee with balance dates between 24 January 2021 and 7 April 2021 have an additional four months to hold their AGM. This extension will be of particular assistance for NFP and community-based organisations who are often public companies limited by guarantee. These entities would have otherwise been required to hold their AGMs between 30 June 2021 and 31 August 2021 (or between 31 August 2021 and 31 October 2021 if relying on ASIC’s ‘no-action’ position).
This joint guidance, Update on online AGMs, electronic document execution and digital shareholder communications, will assist members understand the evolving legal landscape by providing:
- The latest legislative and regulatory updates, and what these mean for holding virtual-only AGMs, hybrid AGMs, issuing notices of meeting and signing documents electronically;
- Tips for holding AGMs in the current environment, including how to meet current requirements using technology and build in flexibility in case of changing circumstances such as protracted or snap lockdowns due to COVID-19;
- Some key learnings from the 2020 AGM season on how to best prepare, mitigate risks and engage shareholders at meetings that use digital technology; and
- What you need to consider before and during the AGM.
Permanent reform on its way
Separately, the Government is also currently consulting on an Exposure Draft piece of legislation, the Treasury Laws Amendment (Measures for Consultation) Bill 2021: Use of technology for meetings and related amendments (Exposure Draft), to permanently allow virtual meetings, electronic document execution and electronic shareholder communication, which is set to be introduced to Parliament later in 2021.
Importantly, the Exposure Draft will only permit companies and schemes to hold a virtual meeting if permitted or required under their constitutions. Many organisations will therefore need to seek shareholder approval to amend their constitutions to realise the full effect of these permanent changes. While this may seem like a challenging requirement during current lockdowns, it does promise an improvement on previously rigid laws that did not allow for a virtual option.
Top tips for the 2021 AGM season
- Check your constitution regarding any provisions affecting the AGM, including direct voting. Where a company or scheme’s constitution does not currently expressly permit virtual meetings, it may wish to consider amending its constitution to enable future flexibility, while the temporary relief measures are still in effect during the 2021 AGM season. This will require shareholder approval via a special resolution.
- Contact your registry and technology provider to discuss arrangements, including platform logistics and any contingency plans. They should be able to advise about features which may enhance shareholders’ experience, including how best to meet requirements for shareholders and members to be able to submit questions orally and in writing.
- Decide what experience your shareholders will have and if affected by current lockdowns, what technology options will be used. Companies must comply with the new requirement under the Corporations Act to allow shareholders and members a reasonable opportunity to exercise a right to speak to the virtual or hybrid meeting orally and in writing. To facilitate shareholders/members’ right to speak orally, technology options might include, for example, external telephone lines or built-in audio software over the meeting platform.
- Consider requirements for sending shareholders/members a notice of meeting. Under the recent amendments to the Corporations Act, notices of meeting may be given electronically to shareholders/members where an electronic address has been provided to the company. However, companies cannot send the notice, in full or a postcard, by electronic means if the recipient has a valid election in place to receive documents in hard copy only. Companies should consult their registries about what elections are in place and seek legal advice if an election is unclear or if shareholder/members’ have conflicting elections.
- Establish an online shareholder Q&A for the AGM. Shareholders can post questions related to the business of the AGM. To the extent practicable, this should be kept up to date with answers up until the deadline for proxy voting. Questions can also be answered at the AGM, in particular, if the AGM is live streamed.
- Consider what verification processes may be required. Organisations should consider if they will require shareholders/members to verify their identity before asking a question orally. Verification processes may enhance security but may also add cost and delays. To enhance security and to enable organisations to estimate demand, those using telephone lines may consider requiring shareholders to contact their registry to obtain a verified access code ahead of the meeting.
- Conduct voting on resolutions via a poll. The temporary relief measures require voting on all resolutions at meetings using technology to be conducted by poll this AGM season (e.g. until March 2022) — even procedural motions, and other matters that the company might normally put to a vote by show of hands.
- Allow sufficient time for shareholders and members to submit questions in writing or dial-in to speak orally throughout the meeting. Be aware that it may take shareholders/members time to type their questions into the platform or get through to the meeting via a telephone line. Open up the Q&A session early in the meeting to enable shareholders to submit written questions online. It is a good idea to also signal clearly to the meeting when the Q&A session will close to enable shareholders to submit final questions, either orally or in writing.
- Chairs should address as many relevant questions from shareholders/members as possible and make clear the position regarding practically similar or identical questions. While it is within a Chair’s discretion to decline to address repetitive or duplicative questions separately, Chairs should be mindful of the risk that shareholders/members may not feel ‘heard’ in a virtual environment. It is important to also remember that there may be nuances in questions that would be lost if questions were grouped. Where a question is practically identical to others previously addressed, and the Chair therefore does not wish to address it separately, they should make that approach clear. In some instances, it may be advisable to still read out questions fully to ensure shareholders/members know they have been received.
- Keep a record of questions and comments received both before and during the meeting (with the exception of any inappropriate or defamatory questions/comments).Companies may wish to consider making this available on their websites following the meeting. This record should not form part of the minutes of the meeting.
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